I just can’t get my head around ICOs, ICO Market Caps and how to make calculated decisions. There’s always someone on Reddit claiming a 1000% profit in any given month. Are they all spammers, scammers, bounty hunters or is it really possible?

Yes, I know, find out about the god damn team and read the almighty white, black and yellow papers. I wish I could make any sense out of those 22,000,000+ post and 700,000+ topics on Bitcointalk…

…And here we go again, another Redditor claiming monthly profits he could bearly believe himself. The post is upvoted by other Redditors claiming to be making the same returns PLUS they are generating even healthier returns from other projects.

Is this really happening or am I being brainwashed? Every god damn project I Google seems to be the best ICO ever.

Feels familiar?

So, where to begin and where should I point my money gun?

Different Perspectives on ICOs

As many cryptocurrency enthusiasts have said, most ICOs are not around in few years time. Considering the progression of the industry it is hard to argue. Many of the current top cryptos will be wiped out by the only tightening competition and this is critical in order to revolutionize the financial system. We need them to fail.

As Andreas Antonopoulos has said, rinse and repeat! Investors mature in time, and not getting involved in garbage coins eventually make room for true revolution.

However, and this is only my personal interpretation of the current situations, is that within the maturing period, there are us, the traders/investors, who can benefit from the craze.

People are wondering why the hell would anyone want to invest something to the ICO craze while BTC is breaking all-time highs.

Well, the reason is simple.

If 1 Bitcoin costs $100,000 tomorrow it would be an 18 fold gain from $5,500 USD to $100,000 USD.

Let’s put that into fairly random ICO perspective.

Walton (WTC) from September 1st to October 1st – 30 day period.

We went from $0.5 USD to $8.5 USD in 30 days. That’s a 17 fold gain.

Do we see Bitcoin reaching these heights anytime soon – I doubt it. Do we see more ICOs providing similar returns – very likely and that’s why many of us are in the ICO business.

Positioning Yourself in The ICO World

We all know that ICO world is a dangerous place and that everything should be taken with a high degree of caution. My approach to this is fairly straightforward. As many of today’s ICOs will be forgotten in coming years simply means that you should be looking them in the shorter timeframe.

Noone is saying that 99% of the projects are shit on paper. In fact, they aren’t until the wind changes direction. The execution matters in the long-term, but right now you have the chance to look things from the short-term perspective.

Those profitable returns are likely to happen in the early phase and taking a long position in ICO world would be a risky game. It’s like looking at the chart in 5-min timeframe because 1-month timeframe is simply too dangerous. This is not a rule of thumb, but a general approach at first.

As ICO niche remains very speculative you should eliminate as much uncertainty as early as possible. There is a fair possibility that the project is an absolute scam and you will never see your money again. Let alone earning any returns on your investment. You should be always trying to minimize the factor of luck; gravitate the probability of success to your side by not buying into the hype.

It doesn’t have to be a lottery, you have all the same tools that many of the very successful ICO traders have. Even if some of them are lying I’m fairly positive that some are not.

And yes, some of them are doing very well. By the way, if you are a successful ICO trader/investor I would like to hear from you as we are planning to launch a series of real-life success stories.

Just be aware of total pump-and-dumb projects from 0 to “the moon” for a day. That’s a single player game and unless you are the player, you are going to lick your wounds.

Let’s get to the main topic of ICO market caps, and apologise for the long intro.

Understanding ROI Potential Through Low ICO Market Caps

The primal incentive for an investor is to generate return on his/her investment making the coin distribution structure one of the first things to consider.

It depends on your investor profile, but low market cap projects come with a greater early profit potential. There is a downside as well, low market cap projects could be manipulated by the whales and other bad actors. Manipulation possibility comes down to demand/trading volume, but as we are considering ICOs, then trading volume as an indicator is not an option.

What can we do?

The best thing here is to get the protection from the ICO team themselves (individual cap), and if this isn’t available, you should learn why and adjust your approach. This doesn’t mean that the risk of manipulation is now gone as once it gets listed on an exchange, anything can happen.

Few terms before we continue.

Circulating Supply – circulating supply is a number of coins available at the present time and circulating in the market.

Total Supply – coins that are in circulation + coins held by the project + total additional emission. In other words, the number of coins that will ever exist for that particular cryptocurrency.

Big/Small Supply and Lowish Hard Cap

Probably the highest ROI (return on investment) potential scenario if the coin price on ICO-phase is reasonable (compare with the market).

I should really emphasize on the word POTENTIAL as it could drop to zero in a heartbeat. This is where we need to be careful, don’t get tangled in the potential without considering other factors. It is possible that nobody cares about the project and they have absolutely nothing to offer.

Smaller vs bigger total supply is not a major factor to consider, it’s neither good nor bad. All that should matter is how the coins are distributed (team, premined etc.) The bigger the total supply the less perceptive the price becomes and this could create unnecessary confusion (there are many who think that bigger supply/smaller price equals garbage), but that’s pretty much all there is.

Low hard cap means that the project has a good chance to pick up post-ICO.

This is also an indication that the team has an idea of how to use the funding and that they weren’t on a fishing trip.

For example, Cindicator, a promising hybrid intelligence project has a healthy approach. Their hard cap is $15M USD and price per one ICO coin is $0,01 USD which means that the total supply will be ~2B coins (including emissions).

Let’s find similar total supply project on coinmarketcap.com.

  • IOTA, total supply ~2,7B, currently trading at $0.45 USD (was close to 1 USD not long ago);
  • BitShares, total supply ~2,6B, currently trading at $0.05 USD;
  • NXT, total supply ~998M, currently trading at $0.064 USD.

Yes, there are examples of projects that are now trading below $0,01 USD (with similar total supply). Most of them, in my opinion, does not deserve to be mentioned.

In contrary, there are also garbage coins that are trading higher than $0.01 USD and that’s where your investor profile comes to play.

Thinking about the relation between $15M low hard cap and the possibility of manipulation? Absolutely and this should be definitely considered.

In the Cindicator example, they have approached the issue with a very reasonable individual cap system, which in their case means that the coins are distributed in 4 tiers.

Those kinds of structures eliminate whales and other speculators at the early stage and this is what you want to see in the ICO structures.

Small/Big supply and Unlimited/High Market Cap

The outcome? Very hard to predict.

You should be careful as unlimited/high market cap increases the factor of uncertainty. Every ICO team, in my opinion, should know where and how the funding is going to be used.

For example, Bancor raised $150M USD which shows that people believe in the technology. I’m also fairly positive that Bancor’s team viewed the result as extremely positive.

But what about the ICO investors? Here’s Bancor’s post-ICO performance and it’s not looking good for early investors.

Again, Bancor isn’t necessarily a bad long-term investment, just that buying the hype and getting on board at ICO stage wasn’t a good move. It was just too heavy to take off and you should always dig into those reasons behind unlimited/high market caps.

PS. It’s common to state that “all the unsold coins during ICO will be burned”. Depends on the project and hype, it might happen and it might not happen – who knows and the uncertainty remains. “If they reach the high hard cap, would my investment make sense?” is the question you should probably ask.

On the other hand, this means that they will never create any additional coins after the end of ICO and this is a good thing.

Why is this a good thing?

If you are going to coinmarketcap.com right now you will see that market caps for all cryptocurrencies are displayed by the circulating supply – this is an indicator of a present market cap.

It doesn’t show you the amount held by the project and it doesn’t show you how many coins would enter in existence during the coming years (i.e total supply) – in other words, it doesn’t show you the progressive inflation.

And that’s something you should factor in as well, more of if you are looking this form the long-term angle. Don’t get me wrong, there is nothing wrong with the inflation it’s just that people usually don’t consider it.

To be considered at ICO stage:

  1. Is there a hard cap;
  2. What’s the total supply;
  3. Price per coin;
  4. Compare with the market.

There Are More to Consider Than Just ICO Market Caps

Just to clarify, the information presented in this article is not sufficient for making calculated decisions. You should most definitely consider business perspectives and other indicators, but dismantling this beast would require a separate article.

Making sure to understand what they are trying to achieve is the first thing to do as every goat hanger doesn’t belong to the blockchain.

Start from the simple – read the white paper. Does it feel/seem professional to you? Is the quality VC presentable? Do they have a working product or a well-tested prototype? Is the idea understandable and simply explainable? Who’s behind the project? What have they done before? Is there a market? What are the use cases? Partnerships etc.

You have every right to ask hard, dumb, repetitive questions before throwing your money at it.

Don’t buy the hype yourself, always do your own due diligence. There are bounty campaigns for most ICOs and people are getting paid to write articles, post on social media and so forth. Again, this is not necessarily a bad thing, just keep your mind alert.

Simplicity and transparency are the keywords to an interesting ICO. If something is overly complicated it’s probably best to stay away from it.

The objective of this article was not to play through every possible ICO scenario and determine the right from wrong, but just to give you a perspective that should pave your way ahead.

We are not connected to or in any other way affiliated with the example projects used in this article. 

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